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Merkel Seeks Clarity from Moscow over Nord Stream 2

[Chancellor of Germany Angela Merkel (right) speaks at a joint press conference held with President of Ukraine Petro Poroshenko (left) in Berlin, Germany on Apr. 10, 2018. Photo: Christian Thiel]

The future of a new gas pipeline project linking Russia to Germany appears to be in jeopardy after Angela Merkel, Chancellor of Germany, stated that the “Nord Stream 2 project is not possible without clarity on the future transit role of Ukraine” for natural gas shipped between Russia and Europe. Chancellor Merkel’s statement, delivered at a joint news conference with President of Ukraine Petro Poroshenko on Apr. 10, 2018, is a reversal from her earlier position on the pipeline, which portrayed the project as “primarily a business venture driven by private investors.”

The Russian Federation supplies the continental European energy grid with a significant amount of natural gas, most of which is shipped via pipelines operated by Russian state-controlled energy firm Gazprom. As such, the European Union (EU) is heavily dependent on its eastern neighbor (and rival) for energy, especially during periods of exceptionally cold weather or high demand for natural gas.

While the largest volume of gas to Europe is shipped by a pipeline running through Ukraine — which allows the Ukrainian government to collect transit fees as a country hosting the pipeline — in 2011, Germany and Russia jointly opened a new pipeline, named Nord Stream 1, to bypass existing land-based pipelines via the Baltic Sea, to avoid complications arising from the contentious Russia-Ukraine relationship, and to expand the volume of Russian gas shipped to Europe.

Gazprom has also sought out projects to construct new pipelines to bypass Ukraine, such as two proposed pipelines across the Black Sea linking Russia with Bulgaria (South Stream) and Turkey (Turkish Stream). These two projects were ultimately terminated in late 2014 and late 2015, respectively.

[A map of the Baltic Sea depicting countries’ claims (territorial waters and exclusive economic zones) along with the route of Nord Stream 1 and the proposed route of Nord Stream 2. Credit: Bloomberg]

In September 2015, Gazprom signed an agreement with five other European energy companies to build a new set of twin pipelines in the Baltic Sea running parallel to Nord Stream 1. While the project, named Nord Stream 2, was under review for environmental permits in July 2017, Gazprom stated that the new pipeline would allow it to save nearly 2 billion USD in transit fees otherwise paid to Ukraine, which would meet the forecasted growth in European gas demand.

Conversely, EU member-states traditionally wary of Russia, including the Baltic States and Poland, along with current transit countries hosting existing pipelines warned that Nord Stream 2 would increase European dependence on Russian gas — thus making the bloc more susceptible to pressure from Moscow — and deprive several states of lucrative income collected via transit fees. The United States expressed its concern that Nord Stream 2 was a threat to European energy security in January 2018, echoing earlier sentiments by President of the European Council Donald Tusk.

Initial statements by German officials regarding Nord Stream 2 in the wake of the poisoning of Sergei Skripal declared that “both developments have to be strictly separated,” with Nord Stream 2 a “commercial project promoted by companies, which have to abide by the applicable national and EU rules.”

However, in the Apr. 10, 2018 press conference with Ukraine’s President Poroshenko, German Chancellor Merkel admitted that “it is not just an economic issue.” Merkel told German media that she had discussed the project with Russian President Vladimir Putin and stated “it cannot be that through Nord Stream 2, Ukraine has no further importance regarding the transit of gas.”

It remains to be seen if this reversal of the German position on Nord Stream 2 is sign of impending greater EU unity on EU-Russia matters. The project has already received all applicable permits from Germany, with Finland close to following; it now awaits approval from Denmark and Sweden.